European Union finance ministers early Thursday agreed new rules they hope will place the burden of paying for failing banks on the shoulders of private investors and creditors, rather than taxpayers. The rules will force lenders to draw up detailed plans on how they could be downsized or closed during a crisis and to pay into national resolution funds.

But the most controversial part of the debate among ministers was whether governments would be allowed to step in and prop up a bank before all unprotected creditors, including large depositors, had been wiped out. Here is what they came up with in seven handy questions and answers.

Does the deal put an end to big bank bailouts in Europe and leave investors and creditors with a clear idea of how much risk they’re taking by putting their money in a bank, whether it’s through shares, bonds or regular deposits?

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Well, not quite. First of all the final rules still have to be agreed with the European Parliament, which is bound to demand some changes. Ministers also built a limited degree of flexibility into the rules, which will allow national authorities to protect some creditors from taking losses in certain cases.

What exactly did the ministers agree on losses for investors and creditors?

If a bank becomes insolvent, the ability of a government to prop up a failing bank will be greatly curtailed. Before any intervention can happen, investors and creditors owning at least 8% of a bank’s total liabilities will have to take losses.

Only once that has taken place, national authorities can step in, using their resolution funds to protect as much as 5% of a bank’s total liabilities from losses. If there isn’t enough money in the resolution fund yet, it can borrow money from its government, but that loan will have to be repaid with money from banks eventually.

Any gap still left after the minimum bail-in and the support from the resolution fund, will again have to come from bail-in. In “extraordinary circumstances” – where there’s a clear risk to a country’s financial stability acknowledged by the European Commission, the EU’s executive – a government can use taxpayer money to protect depositors, but only after all other creditors, including all senior, unsecured bondholders, have been wiped out.

What about help from the euro zone’s rescue fund?

The European Stability Mechanism can be tapped in two cases. If a euro country’s resolution fund is running low and its government is also out of money, it can ask the ESM for a loan. This would be in the form of a traditional bailout deal, like the one for Spain, and would add to the government’s debt load.

As a very last resort and in the “extraordinary circumstances” detailed above, a government will be able to ask the ESM for a direct capital injection for the failing bank, which wouldn’t add to the country’s debt load. Again, this can only happen to protect depositors after all unsecured senior bondholders have been wiped out and has to be approved by the rest of the euro zone.

In what order will investors and creditors take losses?

Shareholders will be wiped out first. Next up are junior bondholders and owners of other subordinated debt. Senior unsecured bonds and large corporate accounts are together next in line, unless there’s special government action to protect depositors. After that, deposits above €100,000 owned by individuals and small to midsize companies will be hit. The only ones always protected are deposits below €100,000 and interbank loans with a maturity of less than 7 days. National authorities can choose to shield derivatives from losses if they believe including them is either impossible during a rushed restructuring or could lead to bigger losses for other creditors.

How harsh are the new rules?

The modus operandi over the past few years has been to bail out rather than to bail in. In many cases, even shareholders have been protected by public money and junior debt owners also mostly emerged unscathed until the Spanish bank rescue last summer.

Since 2008, only two big Cypriot banks — where senior bondholders were wiped out and large depositors took steep losses — and two small Danish banks have been subject to bail-ins of more than 8% of liabilities. Officials believe that bailing in 8% of liabilities will put a bank back on its feet in most cases. But serious failures – say Belgium’s Dexia or Ireland’s Anglo Irish – would still have needed either a broader bail-in or a taxpayer bailout.

When will the new rules come into force?

The official kick-off date for the bail-in rules is 2018. But for poor euro-zone countries that want to tap the bloc’s bailout fund for direct bank support, they will kick in as soon as that kind of aid is possible — likely sometime next year.

Will this increase funding costs for banks?

Opinions are divided on this question. Some experts say at least since the steep losses seen in Cyprus, investors have already been demanding higher interest rates for instruments like junior and senior bank bonds that look much riskier under the new rules. Some also believe funding through deposits may become cheaper thanks to the extra safeguards, but others argue that the opposite is true, since large account holders can be at risk during serious crises, especially in poor euro countries. What seems clear is that most banks will face bigger levies or taxes, even retroactive ones, as governments start building up resolution funds.

About Real Time Brussels

The Wall Street Journal’s Brussels blog is produced by the Brussels bureau of The Wall Street Journal and Dow Jones Newswires. The bureau has been headed since 2009 by Stephen Fidler, who was previously a correspondent and editor for the Financial Times and Reuters. Also posting regularly: Matthew Dalton, Viktoria Dendrinou, Tom Fairless, Naftali Bendavid, Laurence Norman, Gabriele Steinhauser and Valentina Pop.